INCOME TAX ACT, 1961

Section 194N Section 201(1)/(1A)

Tax deduction at source - Assessee-in-default - Non-deduction of tax by bank under section 194N from the amount withdrawn by member societies -

Assessee was Co-operative Bank engaged in the business of banking and various Co-operative Societies were account holders thereof which societies were not carrying on the business of banking. AO took the view that assessee was obliged to have deducted tax when cash withdrawals exceed prescribed limit of One crore rupees. As assessee failed to do so, it was to be deemed to be one in default. Accordingly, AO passed order under section 201(1)/(1A). Assessee challenged the order by way of writ petition. Assessee's case was that if sum withdrawn did not represent income in the hands of account of holder, there could not be levy of tax and assessee could not decide as to whether sum withdrawn by acount-holder represent income and, therefore, assessee was not obliged to deduct TDS and if in the enquiry, assessee was able to place materials before authority so as to bring its case within proviso to section 201(1) authority was bound to drop further roceedings. Held: Since AO had not taken into account entire scheme of the Act and proceeded at breakneck speed, impugned proceedings were quashed. The matter was remitted to AO to issue fresh hearing notices to assessee who would be at liberty to bring on record returns filed by member-Societies who had withdrawn cash beyond ceiling limit of Rupees One Crore. If AO was satisfied that amounts withdrawn by member-societies did not in fact represent income at their hands, he would drop further action AO was not so satisfied, of course, it would be open to AO to pass further orders in accordance with law.

REFERRED :

FAVOUR : Matter remanded.

A.Y. :

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